NEW DELHI, June 6: India’s GDP growth is expected to moderate in FY 2027 at 6.6 per cent after a stronger‑than‑expected 7.7 per cent expansion in fiscal 2026, a report has said.
The report from Crisil Ratings said that a sharp rise in crude prices, a below‑normal monsoon and higher inflation will weigh on consumption and growth.
“Growth outperformed expectations in fiscal 2026 due to fiscal support to private consumption, rate cuts by the Reserve Bank of India, healthy global growth, low inflation, favourable monsoon and low crude oil prices,” the report said.
In FY27, many of these factors are expected to turn adverse and weigh on growth, it added.
Crude oil prices have surged to decadal highs after the onset of the West Asia crisis and are expected to remain high this fiscal, averaging $90-95 per barrel, according to Crisil Intelligence.
The India Meteorological Department (IMD) has expected rainfall at 90 per cent of the long-period average in the 2026 southwest monsoon season, indicating below-normal rains.
The likelihood of El Niño conditions will add to the pressure on agricultural production.
The report forecasted inflation to rise sharply to 5.1 per cent in fiscal 2027 from 2.1 per cent in fiscal 2026, putting pressure on private consumption.
Producers are expected to pass on the sharp rise in the cost of energy and other inputs, as well as trade and transportation, to consumers, which will likely raise core inflation.
Global demand is expected to be weaker this year due to the West Asia conflict and this will likely impact India’s exports, the report said.
Notably, the growth momentum in India sustained despite headwinds from the West Asia conflict that began towards the end of February and intensified in March.
Private final consumption expenditure (PFCE) growth remained healthy at 7.1 per cent vs 8.2 per cent in the previous quarter. It was far higher than the 10-quarter average of 6.4 per cent.
Q1 growth may surpass RBI’s 6.6% estimate: Report
April and May high‑frequency indicators showed above‑average acceleration in growth and, if the trend continues in June, FY27 growth could surpass the Reserve Bank of India’s estimate of 6.6 per cent, a report said on Saturday. The report from SBI Research said, “Despite external headwinds, the Indian economy is poised to remain the fastest‑growing major economy in FY27 by leveraging its sound macroeconomic fundamentals and robust financial sector.”Further, “deflator might also increase to 6.5-7 per cent from its earlier estimate of 4.5-5 per cent”, thereby raising GDP growth to 12.5 per cent-13 per cent compared to the budgeted estimate of 10 per cent, the report noted.
The report highlighted formalisation and digitisation as drivers of labour productivity and improved institutional credit access and cited PLFS data suggesting training reduces informality in employment.
“With more digitisation and skill development initiatives by the government, we believe that the growth momentum will continue,” it forecasted.
Showcasing maturity and a rare sense of resilience, the Indian economy grew by 7.8 per cent in Q4 FY26, up from 7 per cent growth in the same quarter last fiscal.
Buoyed by the Q4 numbers, the annual FY26 growth is estimated at 7.7 per cent, up from 7.1 per cent in FY25.
SBI Research also noted that the recent US tech‑led stock sell‑off is due to thwarted market expectations of a dovish pivot by the Federal Reserve, as the US economy added more jobs than expected.
The high-growth tech sector is sensitive to interest rates due to duration risk, as it has stepped up borrowing aggressively of late, the report noted.A recent report from Crisil Ratings said that a sharp rise in crude prices, a below‑normal monsoon and higher inflation will weigh on consumption and growth. (IANS)
